City Council - Regular Meeting

Sure. One 2 Three.

All right. If anyone wishes to address the city council on any item considered at this meeting before or during council's consideration of that item, please enter your name in the electronic kiosk located in the lobby. The city council will allocate up to a maximum of three minutes per speaker for each agenda item. Staff reports are available online at the city's website at www.c cityofwriting.gov and also in the public viewbinder located on the podium at the north side of the chambers. U we're going to call this meeting to order. Apologize for the delay. We've just been waiting for everybody to show up that uh and um we'll start with roll call. So,

council member Odette ready. Uh, Vice Mayor Denuka is on his way. Not here yet. Uh, Muns here. Resner present. And Mayor Latah

here. Okay. We've uh had the special meeting today. Uh, today is the presentation of the Reading Bianual Budget Revenue Discussion for the years 26 and 27. Uh we're going to start off with a presentation with our finance director Greg today and then um we'll be able to get into any other questions that we have during this meeting. So I know it's a very lengthy presentation, a lot of slides and um we are running short on time, but we want to make sure we get right to it. So Greg, are you ready or Carrie, do you have anything to add at this point? Um yes, please. Okay.

All right. Uh so before director Robinette begins his presentation, I would like to provide the council with a little bit of information. Uh first I'd like to reiterate that the dashboards are point in time as of December 18th and were completed under the direction of the former interim city manager. As updated data becomes available, staff will work with the incoming city manager to bring forward uh the updated information to council. Uh secondly, I'd like to remind council and the public that the finance director is here to provide data information behind the data and scenarios to the council. Um but it's not the finance director's role to make the recommendations. It's the city manager's role to make these recommendations. And once the new city manager is in place, a short two weeks away, um I fully anticipate that he'll carefully review the budget and revenue projections and he may be bringing forward his own recommendations to the council, especially as updated information becomes available. Lastly, I'd like to ask the council to hold all questions until the end of Mr. Robinette's presentation. This is helpful for maintaining the flow of the presentation as well as ensuring that we don't jump ahead ahead in the presentation. He will address any questions at the end of the presentation. And then following the presentation, council may provide direction to staff on which if any revenue projections they would like to discuss and or modify. So with that, I'll hand it over to Greg. Uh good afternoon, mayor, council, members of the community, uh director of finance, and city treasurer Greg Robinette. Here to present our uh potential scenarios and discussion around our fiscal year 2006 2027 revenues. So, first a brief outline of the presentation. Um, first we're going to

touch on some interim cost control measures that have been instituted uh over the past few months or or are in the process of being instituted. Um, then we're going to go through the revenue sources as they are presented in the 10-year plan or the budget. I will note quickly now and when we're on that slide that they are present, they are grouped slightly differently for the purposes of this presentation to help with discussion and the overall flow of the presentation. Um then we'll go through the tax revenues specifically internal departments and transfer revenues, public safety revenues, development services revenues, community services revenues, and then finally some miscellaneous and other revenues. So while we've been working through uh decreasing some of our major revenues, we've implemented the following interim cost control measures. We have a hiring freeze. uh we are analyzing and controlling overtime and directors are required to review and approve all expenditures prior to them occurring. So the revenue sources as outlined in the 10-year plan or in the banial budget are as follows. We have tax revenues, licenses and permits, fines and penalties, other government internal department revenue, service charges, other revenues, use of money and property and transfers in and out. Importantly during this presentation, these ars groups slightly different to help facilitate the conversation. Um, as mentioned on a previous slide, we grouped all of the recreation revenues as an example for the purposes of conversation and development services. So, we took multiple different types of revenues and put them in those areas. And so, the presentation won't exactly follow this, but all of the revenues that are included are included in this presentation. So with that we'll get started on discussing the sales tax revenue. So information about sales tax this is collected by California department of tax and fee administration and remitted to the city monthly through the forms of estimates to the city and then every the

second month following the end of each quarter we receive what's oftentimes called a cleanup. Um the city receives 1% of the 7.25% which is about 13.8 8 cents of every dollar that's paid in sales tax and this is known as the Bradley Burns tax. Um the the Bradley Burns is based on the point of sale unless it is in regards to online sales and then it is goes into the county pool. The county pool is determined or divided based on the point of sale transactions throughout the county. Um the exception to the county pool is things that have a warehouse such as Amazon or Target. There's about 10 to 12 different companies that actually operate warehouses within the state of California. They report those taxable sales through the warehouse in which the order is fulfilled out of. And so this the city of Reading would receive no no sales tax if it is coming from one of those warehouses. So a quick overview of the history the last 10 years history of sales tax. Um, effectively since 2023, the sales tax has been flat. As you can see here, prior to that, it was on a pretty steady growth trajectory and then there was a large increase in fiscal year 2021 and fiscal year 2022. And since then, it has dropped and then maintained the flat amount. Um, at the current point in time through January, sales tax is approximately $279,000 down year-over-year or 1.6%. and relative to the forecasted budget is $1.2 million down or 6.6%. The next graph will depict for council and the audience um the changes year-over-year for the revenue. And as noted um it in the uh attachments to the uh agenda item, the volatility or the

difficulty in predicting this revenue has gotten a lot more difficult since about fiscal year 2020. As you can see, large upswings and large downswings that have occurred. And this makes the forecast modeling very difficult. Additionally, any anytime the revenue is flat or goes negative, um that presents its own challenge because oftentimes the assumptions are built on steady growth. Um the average growth over the 10 years was about 3.3%. If you were to remove that one high year, it's about a 2% average growth. So that 16.74% if you were to remove that as an outlier, and it would be about a just over 2% average growth over that 10 years. Um, next up is the adopted budget that was adopted or approved by council in June. Um, the adopted budget at that time. It's important to note that at the time of adopting the budget or or doing the forecasted revenues, which would have been last or frankly around this time, we would have started on that process. Um, it was assumed that sales tax would be flat from fiscal year 2024 to fiscal year 2025 and then it would grow. Um through council conversation we dropped this assumption from 2.5% to 2% in fiscal year 26 and 27 and then it would be 2.5% thereafter. Um as council knows at this point the fiscal year 2025 amount actually came in below the flat amount. So it was about 1.6% below 1.63% below at about 30 million 30.2 million 30.3 million. And so that will be one important data point. All of the scenarios that'll be on the next slide will include this updating or resetting to the actual 2025 number that was received. Um oftent times when I talk about these revenues, I will be referring to the year-over-year percent changes. Um but there are other important data points. Um and if if council wants to ask me about those, I can present those at the

end around relative to budget. But oftentimes for this for the sake of continuity, I just want to point out that I'm going to be talking about it um year over year unless I say something different. I'll probably repeat myself many times on that. So, um I I I want to start by saying these are just three potential scenarios. I I think council and many people could see that there's likely a variety of other scenarios that you could arrive at. um every scenario with the exception of saying we're going to assume zero revenue presents its own uh potential risk that you miss the revenue projection. Um so in the packet um for each of the uh major tax revenues we outlined what does it mean if uh the the projection is missed by 1% or 5%. In the case of sales tax, it's about $300,000 for every 1% that the tax for the sales tax forecast is missed. Um so the first scenario um I would offer might be a little optimistic. It does the reset as discussed from uh 2025 actual amount received to 30.3 million roughly as you can see on the um chart on the right. And then it it go it just continues to use our budget assumptions as discussed with council in November. Um through November, our sales tax was down approximately 7% year-over-year and it missed our projection by 9.9%. Through November, which was when the um dashboards were written, uh that had improved and to 1.78% year-over-year and 8.8% relative to the projection. And now through January, I have this information updated, not in the packet, but ready for the presentation today. Um it's down approximately 1.59% year-over-year and 6.5% relative to the projection. Um so this scenario is unlikely to occur um based on the simple fact that it uh the

revenue does not appear after 7 months that it's going to grow year-over-year. I will add that the reason for some of the large amount that was noted at the September or through September update that was done in November was because of some one-time adjustments. Um, frankly, it's a small data set at that point in the year. It's three months of data, and you're working on a large adjustment that was given to us, a one-time adjustment. But our our MUN uh, it's called municipal services. They continue to tell us that economically sales tax is basically flat year-over-year. And based on the trend that is continuing, that appears to be true. um with the exception of that onetime adjustment which is causing us to be below uh year-over-year by like as I mentioned 1.59%. Um so scenario one is the red line. Scenario two which is the green line. Um this is in line with the year-to- date results through January as mentioned that's 1.6% down year-over-year. This assumption uses a negative 2% year-over-year from fiscal year 2025 to fiscal year 2026. And then this is an important um topic of conversation. It actually uses a lower 1.5% long-term assumption um in consulting with MUN services and discussing kind of the state of sales tax across the state of California. Um they are recommending lowering the long-term assumption based on a variety of factors. Um one of those frankly is probably the impacts of the um high inflation that we've seen over the past few years. people have less available income to expend on uh taxable goods. So therefore, less sales taxable purchases are occurring. Additionally, they pointed out during the last discussion that we have uh the baby boomer generation moving on to fixed incomes and having uh less discretionary income, if you will, to spend on taxable goods. And finally, one item that we discussed at our last

update was this idea of um the younger generation who is mo should be moving into the supporting that taxable base being frankly less interested or less able to purchase taxable goods. Um many of uh the people in that generation aren't owning homes. So therefore, they are particularly impacted by inflation as rent prices go up and other costs of living goes up and there and there may be less money available to spend on taxable goods. So this would be a categorical shift to a 1.5% long-term assumption on the green line. Scenario three, um it's it was in line with the year-to-ate results through September by going negative 7% year-over-year from fiscal year 2025 to fiscal year 2026. and then using uh the same budget assumptions thereafter 2% in fiscal year 2027 and 2.5% in fis in every fiscal year thereafter. Next we are going to discuss the property tax. Um this is collected by Shasta County on our behalf. Um it's important to note proposition 13 and AB8. um these both have significant impact on how the tax is allocated and how it is actually taxed on the properties. So there's a historical allocation base which which sets the base percentage that is received by each municipality within this uh Shassa County. And then there's um Proposition 13 particularly has a limit on the amount of valuation increases and and both of these have impacts on how the money is distributed to each of the municipalities within the county. Um, Proposition 13, uh, as mentioned, basically limits the amount they can increase the valuation if the property is not sold. And so, in a in a market where there is not a lot of turnover of properties, this could have a negative impact on the long-term growth of the property tax. Um, as mentioned

previously to council, but as a reminder, the majority of this tax is remitted to the city in January and May. So the next graph um shows kind of the property tax history as a as a line graph of values. And as you can see there from about fiscal year 2019 to really current um we've seen a steepening of that uh that graph as as there's been a lot of commercial construction in our area. Um, frankly, a lot there was a lot of um homes being built um in, you know, that 2020 range when interest rates were extremely low. We were seeing a high amount of turnover in the home market. And so there was um some pretty historic increases, but overall the average increase is 5.61% over these 10 years. Um I'll talk about in just a second what was assumed during the adopted budget, but the um this is an important graph to kind of set the history as we get into the um next budget or the next part of the discussion. Um this is a graph that shows um kind of the percentage change um year-over-year again. And as you can see here, this graph is a lot less volatile. No large swings up and down. um it kind of stays within a pretty tightly banded group other than the one outlier in 2017 where it effectively did not grow. Um it inherently makes this revenue easier to forecast because of the level of predictability. Doesn't mean it's foolproof, but it does make it easier to forecast. So this is the adopted budget graph um that council approved in June. Um again, it's important to talk about fiscal year 2025. Um during the budget development process uh it was assumed that it was going to grow by 4.5%. It ended up

growing slightly more than that by 4.79% and then in fiscal year 2026 it was assumed it would grow 3% and then 3% thereafter in all fiscal years through January. This is up 4.16% year-over-year which is almost 700,000 and up 1.07% 07% above the budget or 185,000 through January. It's important to there might be a question well why did we use 3% when we were building this revenue assumption. I think this is the acknowledgement that uh the past years the growth the rate of growth was inflated due to commercial construction housing market housing turnover and that dynamic is changing and so the the lowering of the assumption was a goal to reflect that changing market and um as I just pointed out it's grown more than that in this fiscal year in fiscal year 2026 as it grew 4.16% instead of 3% Um, again, just to talk about the ramifications of potentially missing this revenue, um, every 1% is approximately $300,000 on an annual basis. Um, which means 5% would be about $1.5 million to the positive or negative depending on which side you missed it on. So now um talking about the potential updated scenarios um all of these scenarios um effectively reindex um the the revenue to fiscal year 2025 actual number which was 29.751 million. And scenario one actually um utilizes a much more aggressive forecast uh us it utilizes a 4% which is in line with what we're actually seeing for fiscal year 2026 but then utilizes a 5% um thereafter. This would be a very aggressive assumption if council were to

choose this. Um, in scenario two, the actual, again, we're indexing it to the actual 2025 number and then recognizing that fiscal year 2026 has actually come in above 4% thus far and updating that um, FY26 amount to 4% and then using 3% thereafter, which was the same as the adopted budget. And then scenario three, um, sorry, just to color coordinate here, scenario one is green, scenario two is purple, and scenario three is the light blue. Um, the red line is the adopted budget. Scenario three would um do the 4% and then use a lower assumption of 2% thereafter um as a potential risk mitigation strategy if council so desired. Um, the next major revenue um is transient occupancy tax. This is collected by our city finance department and treasur. Um this is uh tax under ready municipal code 4.12. There is 10% of the rent charge on transient occupancy of hotels and um short-term rentals. And the this is due and payable by the 20th day of the month following. It's important to note um if you're sitting out there in the crowd and you happen to be one of these individuals who files these returns, you might be thinking I pay 12%. There's a 2% um charge that has been voted on by a a group in our community. It's called the TMBB tax that um the city acts as the fiduciary on. It is collected on their behalf and remitted to them each month. This is um the historical graph of the actual results of transient occupancy tax. As you can see, transient transient occupancy tax has had some large peaks over the years, but generally continues to go up um uh over time. Those large peaks happen for a variety of reasons. Uh we we do know in fiscal year 2018

2019 time frame, it was mostly a result of some major fires in our area and we had fire crews um staying here and frankly maybe some displaced residents in some communities staying in our hotels. And then in fiscal year 2021 2022 time frame, we believe this was a result of the Corona virus and people wanting to not travel on airplanes and felt more comfortable uh going somewhere they could drive. Um overall um it it continues to go up. Um but in the past couple years, you can see it's been pretty flat. Um, the good news is, and I'll get into it in a couple slides, um, the current year is up year-over-year relative to fiscal year 2025. This next graph is a ch shows again the change year-over-year relative to the year prior. Um, I will point out just as I pointed out on the sales tax graph that um, demonstrated the same information, this is a highly volatile revenue, which means it is a a lot more difficult to predict um, if you're going to have large ups or large downs year-over-year. It is um, good to point out though that the the consequences of a miss with this revenue given the the sheer uh, amount of the revenue is a lot smaller. So a 1% miss in this revenue is about $75,000 and a 5% miss would be about $364,000. Um this graph shows the adopted budget. Um it assumed flat from fiscal year 2024 or from fiscal year 2024 to fiscal year 2025. And then um it just utilized the long-term growth assumption that's been used in the 10-year plan for a long time of 4%. Next is um three potential scenarios for transient occupancy tax. Um first is the green line um which updates it to the 2025 actual and then it uses utilizes a

5% thereafter which is in line with the historical average but presents um a great deal of risk. Um the historical average is 6.55% but as we discussed there are some large swings that have happened over the years with transient occupancy tax. Um and this would increase the risk of um missing the projection based on this volatility. Um scenario two would effectively be keeping our budget. The results through um January are effectively right in line. We're slightly below I think it's about $40,000 below the forecast through January. Um and then it it utilizes it continues to utilize a long-term assumption of 4%. Scenario three um would update uh 2025 to the actual. It would use a flat assumption from fiscal year 2025 to fiscal year 2026 and then it would lower the long-term assumption to 3% thereafter. Cannabis and other taxes. Um these are all collected by the city. Um the cannabis tax is the most substantial of the taxes and it is um regulated under reading municipal code 4.10. Um the per square foot uh cultivation tax is $5. The gross receipt tax on retail sales is 6%. Um other commercial is taxed at 4% of the gross receipts and this is collected quarterly. Um of note here for council is in March of 2025, council directed um staff and actually voted on a resolution to increase these. Uh the cultivation tax was increased um from $3 to $5. the retail sales was increased from 5% of gross receipts to 6% and the commercial was increased from 3% to 4%. Um naturally this did create a difficulty that we'll get into in the next couple slides in forecasting this revenue because um as you'll see on the next slide this revenue has been largely

going down or flat but we increased the tax rate and trying to estimate how much it's going down offset by these increases the tax rate um was a little bit challenging. I do want to point out that of the cannabis taxes that are received, 20% of the total tax volume is attributable to cultivation, 80% is attributable to retail, and a um a small like less than 1% is attributable to the commercial sales. And then listed there on the bottom of the slide is the other taxes associated to the business license tax, the franchise taxes, and the real property taxes. Um so this graph shows the last five years of results in this area. Um for council's benefit, cannabis tax prior to that was not um approved and was not taxed. It was approved in um first year of taxes was a fiscal year 2020. Um and as you can see there, it's it's been going down slightly over the past few years, but a pretty substantial drop from fiscal year 2022 to fiscal year 2023. And other taxes has uh largely remained flat. Again, the volume of this revenue um means that it's it's only about a $40,000 for every percent miss uh impact to the general fund because the combination of these two is uh just a little over $4 million. This graph shows the percent changes as you can see largely flat um slightly going down in the in the recent years. Um so and this one um frankly there you know there wasn't enough data points to really discern as I talked about how we would forecast this. So you know we adopted a budget using estimated increase on the cannabis tax based on the council action. Um there were some pretty large increases assumed during that budget, but it was trying to offset the differences between um

implementing the new tax rates, but also realizing the revenue was going down and and through this update, we only have one uh now two tax returns that have been filed on those new tax rates. So the first tax returns that would be received in the fiscal year actually would utilize the old tax rates. And so we're still gathering data to help frame what the outcome of cannabis will be and the impact of the cannabis tax with the new tax rates. But for council's discussion, we did put together three scenarios. Um largely just trying to reflect what we're actually seeing the in the performance of these revenues. Um the green line would be kind of that optimistic scenario as discussed and then the purple and blue line would be kind of updating to what we think the actual amount's going to be in fiscal year 2026. Um one a little more aggressively so um than the other. Um move moving into um internal department revenues. So there's a large amount of revenues in this area that are calculated through the budget development process. These include cost allocation plan, uh the NPDES reimbursement, the public works administration allocation, the payment in lie of taxes um paid by REU, the gas tax transfer, the utility road impact transfers, the airport transfer for the reimbursement of fire captains, and then the dedicated public safety funds that are received into a separate fund and transferred into the general fund after we uh ensure our maintenance of effort. So, first up is the cost allocation plan. This is a um reimbursement to the general fund for the services that are performed out of the general fund for um our city manager's office, our city attorney's office, finance, treasur, purchasing, uh city clerk and also uh personnel department. All of those departments are housed within the

general fund and we do an allocation process every two years to determine the cost of those services. is we look back, we review the costs, we look back at a variety of factors depending on the department and we allocate these costs across all of our different funds including the enterprise funds, the internal service funds. We don't charge this to the general fund. So any allocation that is attributable to the general fund given that it's all within the general fund, we don't actually make a transfer to cover that expense. Um the other funds do we do a a monthly journal entry that actually books this revenue. Um, and this is all based on a large amount of work that's done within the finance department each budget cycle. NPDES is a revenue that reimburses our public works department for um, basically the services they perform as required. Um, it's engineering and environmental work. There's five positions with different amounts of time allocated for each of these positions based on their efforts. And additionally they incur some costs around permitting fees, advertising, training and certifications and different studies they're required to perform. The next revenue is the public works administration allocation. Um this is uh an attempt to reimburse the general fund for the services of our public works director and a couple of their other highle managers that live within the general fund but perform work on behalf of all of our utilities. Um this includes uh the director, the assistant director and there's financial support positions. Each of these positions are analyzed and an appropriate percentage of their time is allocated to um time and then of course the cost associated to that time which is um the reason for the drop is the um previous public works director particularly um and the state of our PARs plan meant that there was a large amount of uh pension costs that

are now not present with a our public works director not being a PARS member and also as council member remember during the budget development process. Our PARs plan is now fully funded. Um the next revenue is the payment in lie of taxes from uh the writing electric utility. Um this is calculated based on the value of RU assets. Um it's important to know you'll see kind of an up and down nature of this. This is because finance does a look back look forward process and in the first year of each budget it is tred up to the actual amounts that should have been paid over the past two years. And so sometimes that results in a positive or negative impact. And so um overall though this revenue has largely remained flat um for the past 10 years. And you can see five years of that um here in this graph which means that the spending power of this revenue continues to deteriorate every year as it effectively remains flat. Next up is uh gas tax transfers. Um basically during the budget process we estimate the gas tax transfer uh based on the forecasted expenditures um net of other revenue sources. There are no general fund dollars effectively used to help offset the street maintenance performances or street project performances. This ensures as we do this that there's enough available balance to cover all the expenses in the streets department, but also that gas tax has enough available balance through new revenues that are forecasted and through balances held within the gas tax funds to cover these transfers. Next up is the utility road impact transfers. Again, this is an estimate of the road damages done by solid waste, water, wastewater, and it's increased by CPI for the cost of the streets repairs that are required on the road damages.

Um, next up is airport transfer. Um this is uh previous to um 2024 I believe we used to actually calculate this as a payment in le of taxes much like uh reuse um however as it never was charged at the full amount there was an agreement that um in the early 2000s to basically increase it by $10,000 every year um with some extra scrutiny on airports uh we just decided it was more transparent to um budget for the reimbursement of the ARF captains for council's benefit. This does not cover the entire cost of the ARF captains. It covers a portion of the cost. It's determined that airport can afford to pay for um the cost of the ARF captain ARF captains in the current budget. Uh there's three ARF captains who are dedicated to services at the airport. they do not leave the airport is about $850,000 and the airport pays about $250,000 for this service. Um, again, as I mentioned, the transfer is based on the capacity of the airport and the ability to afford this transfer and and frankly the the needs of the general fund at the same time, but currently the general fund effectively pays $600,000 for that service and the airport pays $250,000. Next up is a dedicated public safety fund that is received by um the Shasta County. We have received $272,000 since 1993. Um there is a maintenance of effort requirement on this money um that we are required to file every year and then is transferred at the end of every year from uh dedicated fund that when we receive the money it is receded into and then transferred to the general fund. Uh, next up is the transfers out. This consists of rolling stock, equipment replacement, the library transfer, the convention center, and the visit reading

transfer. There's also a small transfer to parking in year one of the budget. And then, of course, any repayment of advances. This um graph, I know it's it's a lot to look at. It depicts um the actual rolling stock for the time period leading up to fiscal year 26 and 27 for police, fire, um and streets, recreation, development services. Um for note, uh police is currently we're transferring $200,000 to fund their rolling stock. Fire $200,000. Streets is transferring $425,000 that is reimbursed by gas taxes. Parks is transferring 55,000 and recreation is transferring um 5,000. The high water mark you can see there in fiscal year 2022 was approximately se um 750 uh,000 for fire and 686,000 for police. Um since then through the need to balance the budget these amounts have been reduced. I I think it's important to note $200,000 in rolling stock for police and fire each is not enough to sustain their needs and likely will result in future um either equipment breakages that council will have will be unable to postpone. Um and when I say equipment, I mean vehicles or um just potentially not having money in place when a future replacement is needed. And so this presents risk to future um rolling stock needs and probably frankly some some risk in the short term as well. Equipment replacement is next up. This funds a variety of different equipment needs across um these departments. Uh police, fire, parks, and recreation each have um transfers. The current budgeted

transfers is $50,000 for police, $150,000 for fire, parks 55,000, recreation three. Um the high water mark of each of these was 147 for police, 305 for fire, 100,000 for parks, and recreation uh high high water mark was 10,000. Um I will particularly point out fire in this regard. Um they currently are going through the process um I believe of replacing what's called their SCBA bottles. Um this is the type of equipment that is replaced by this money. I know they um are applying for a grant and hopeful to receive it, but that's an example where if we do not have enough money saved through the equipment replacement transfer process, um there would be a resolution that would be required to come to council to fund that. And so hopefully we received that grant, but that is a good example where historically speaking, we have not um saved enough money for that replacement um in this fund. Next up is the transfer to the libraries. I know it's confusing to look at the graph. a negative number. I would think of it, I know we're sitting here talking about a revenue um presentation and it is a revenue to the government of the city of Reading. Um but it is an expense to the general fund. And so the general fund, I would think of this as an expense, has entered into an agreement with the county and the the budgeted transfers are depicted on this graph. And and so these are negative numbers to the general fund which again are more akin to an expenditure as we transfer the money from the general fund to the library to meet our end of the bargain. It's about $1.2 million per year in the current budget. Um next up is the convention center. This is u this transfer is based on the expenditures that the city is required to incur at the convention center. And importantly the the largest factor here is the visit reading contract. So the convention center piece is net of any revenues that are received by the

convention center. Um over the years the convention center um has had a changing uh environment of their contract where there were years where they had revenues that offset some of the expenses that the city is required to incur as the landlord. Um but recently um more expenses have had to be offset through a general fund transfer. Um, and as you can see there, the the amount to visit Reading over the past few years has been decreasing. Um, and recently the contract was reduced to about $650,000. Finally, the parking transfer. Um, this is based on basically our parking funds revenues less expenses. If they have less revenues than expenses, then we have to do a a transfer. In fiscal year 2025, we did a transfer that was was actually categorized as a a loan because uh current forecasts expect that parking will eventually have sufficient revenue to um pay that loan back and break even operationally. But in first year of the budget, there was about a $50,000 $38,000 loan uh or transfer to parking that was needed to balance their budget. Next up is repayment of advances. This is the uh payment of the radio loan and the so the remaining piece of the soccer turf loan that was not um relieved and uh during the budget development process council deferred loan payments until the next budget cycle. So there's the only budget budgeted payments right now are for the turf repayment loan as the city receives money um from the operator out there. That money is then remitted to REU to repay the remaining balance on the turf loan. Um, next up is public safety revenues and these fall into kind of five major categories there. First up is fines and fees. Um, next up is contributions and

reimbursements and then miscellaneous revenue, bad debt, and then grants. Um, so first up the the fees. There's a police there's police fingerprinting fees, massage parlor fees, card room fees, pawn fees, concealed weapon fees, um inspection fees. So, there's a large number of fees that are charged through um the the police and fire departments. Um then there's fines. These include towing cost recovery, um vi vehicle code violations, traffic violations, VCF violations, and red light camera violations. Um I will point out that our assumptions around um red light camera is pretty conservative. Um we we don't want to be super aggressive and that's the reason for the kind of change from the actual of the blue line to the budgeted red line. Um red light camera for the benefit of council in fiscal year 2024 was approximately 600,000. In fiscal year 2025, approximately 800,000 in the budget, there was 238,000 and 20 approximately $250,000 budgeted each year for that um revenue, which is by far the largest source of revenue um in this category. Um next up is contributions and reimbursement. Um the reason for the spike is fire OT reimbursement when they go out of county on response. And so we don't budget for any reimbursement in that category. um we we basically reimburse the general fund for the expenditures that are incurred and that's the reason the blue line is a lot higher than the forecasted line. The budget is mostly for school resource officer agreements that reside within um writing police department. Um next up is miscellaneous revenue. This includes um sales of property, loss of property and damages. Um this is budgeted conservatively based on past actuals. Um, and it's it's a very hard revenue to forecast, but it's a it's a

small revenue. Um, same with bad debt. Again, we we budget conservatively. Bad debt again is kind of all those things we've discussed, what are we not going to collect? And um there's a historical line there that bounces up and down and we we try to kind of shoot the middle of that historical line. Um, next up is grant revenue. Um, as council may know, I've discussed the fact that we're slowly trying to move this into the general fund grants department, but there are some grants that originated um prior to the new system launch and so those are still within the general fund directly. Um, this grant particularly that we budgeted for is for the safer FEMA grant um which is set to expire during the current budget period. We also uh have discussed with council there's some outstanding billing issues regarding this revenue. Um we are working with uh FEMA to get those billing issues corrected. Um and as I stated, future grants will be placed in the uh general fund grants uh fund. So next up is development services revenues. These consist of permit revenues, fee revenues, cannabis permit fees, code enforcement fines, and then some miscellaneous revenues. And then there's a subdivision um group within here where they're they're doing development work um that's reimbursed dollar for dollar based on costs incurred. Um first the most important concept uh when discussing development services is this idea of a subsidy. So council previous councils and current council have decided we're not going to charge the full amount to provide these services which means that general fund tax revenue is going to subsidize the difference. Um if you look at the entire development services department there's about a $1.3 million impact to the general fund. Um when when it comes to development services, there are certain services that they are providing that frankly can't really be reimbursed because they are just cost of a government doing business. Um we

estimate that that might be somewhere in the neighborhood of.3 to $.4 million. Um but there's still a subsidy within the development services department from the general fund utilizing available tax revenues. So first up is um the permit fees. Um over this during the budget development process, council directed staff to increase all development services um fees by approximately 10% was the estimate that we used um through trying to um close that subsidy um to development services. And so that's the the reason for the increase on this line was basically based on the increases that we were forecasting to the permit revenues. Um next up is the fee revenues. This includes uh the short-term rental fees and particularly pointing the short-term rental fees out because those were lowered um based on the actual activity we were seeing um over the previous years. And so we actually lowered this revenue uh to reflect that activity um of STRs and other fee revenues while trying to attempt to increase it for uh the increases that were approved by council. Next up is the cannabis permit fees. Um again we we lowered this revenue based on the activity the recent activity trends and there and trying to base it on the actual activity that we expect over the coming budget cycle. Um next up is code enforcement fines. This one is extremely tricky because there's a lot of uncollectible items that occur within code enforcement and so trying to budget effectively the amount that we think is reasonably collectible is the goal and that's the reason for the the conservative assumption on this revenue. Uh next next up is miscellaneous revenue. This um largely consists of the text search charge. There are also some miscellaneous charges for different

publications and maps that uh citizens come in and order and and buy. Um but most of this is the tax sir charge fee that is charged by development services um for the technology utilized within their department. Uh next up is a subdivision planning permits. Um this effectively is a budgeted revenue that is designed to offset expected costs incurred. Um it's just an estimate as you can see there. Some years we collect uh well not more. We've never collected more in this area, but some some years we collect less. That means there's less activity in this area. But this is a dollar for-doll reimbursement and it's effectively just an an estimate where we estimate that we're going to incur $100,000 worth of expenses and $100,000 worth of revenue. And then um based on actual activity um the budget is um spent and rectified within the budget. Next up is community services revenues. Um, this includes the aquatic center, recreation programs, the reading sports park, and then various parks, which includes leases and rentals. Um, it's important here to note, and I I left parks out of this conversation. This is only discussing uh recreation and the aquatic center, but the general fund subsidy is approximately $1.5 million for those services. Reading Sports Park was budgeted to be a net break even. um my most recent conversation um with the director of community services is that it is achieving that um through uh the most recent time period. So first up um is aquatic center revenues. I do want to point out with aquatic center and um the recreation programs we are doing our best to separate them in previous years. Up until the launch of the new system, this was all within one department which made estimating these revenues, they were all kind of grouped together. Um, so we're doing our best to split them apart now that we have a dedicated aquatic center uh division. Um, but as you can see there, we're we're expecting some modest increases within the aquatic

center. Um, recreation programs um in an abundance of caution uh and and the fact that sports park was actually included in FY25 in that amount and now it has its own division as well. We budgeted conservatively on that amount. And then to zoom in on Reading Sports Park, the actual revenue was approximately $500,000 in fiscal year 2025. And then in fiscal year 2026, we're forecasting about $850,000 and about a little over that in fiscal year 2027. And that fully offsets the costs that are um budgeted to be incurred. Um parks um leases and rentals. Um most of this revenue is cell tower rents. um these revenues are used to improve parks facilities and so there's a basically an equal budgeted amount um within community services um for these re for those revenues. Um that was council direction in probably about 2017 2018 as they started um entering into these agreements to have cell towers out our our park facilities. Moving on to miscellaneous revenues. Um this includes investment income, lease and rental revenues, uh miscellaneous fees, animal licenses, bad debt, um public works, land development, and some other small revenues. Um first up is um the investment income. Uh I as you can see we budgeting pretty conservatively. This um we allocate this amount based on the cash balances held within each fund. Um, so overall citywide, the earnings in this area was over $7 million last fiscal year. Um, and as you can see there, the general fund was about $250 $300,000 of that. Um, so it's based on reserve balances and the rate of return. Um, if you follow the investment market,

particularly in the bond area, which is mostly what our investments are are are in, uh, you'll notice that bond returns are dropping. And so our investment forecasted investment income will will drop in line with that. Um, next up is various city leases and rental revenues. Um, the the reason for the drop from fiscal year 2024 to fiscal year 2025 was the removal of Big League Dreams revenue as they were no longer operating. um they paid a percentage of their um net profit to the city and we no longer have that included in the revenues. And then the reason for the increase to the budget was the CalFire building over here on the corner of um Cyprus um is now uh required to pay rents to the city for that building. Um next up is a variety of um miscellaneous fees. Most of this revenue is late fees and it is um as you can see there pretty flat. The reason for the large drop at the beginning of this was late fees were actually waved uh during the pandemic and so during the COVID pandemic the late fees were waved and they were not collected and as you as you can see there they've come back online and stayed pretty consistent. Next up is animal licenses. Um conservative budget of about $50,000 a year in line with the historical averages. and then bad debt across kind of all other city departments that weren't previously mentioned. Again, trying to estimate a conservative assumption of revenues that will not be collected. And then finally, public works land development. Much like the uh planning side of the land development, this is budgeted to offset the expenses that are forecasted. Um it's collected as we bill it, as we incur the charges. And so again, the budgeted revenues equal the budgeted expenses as we per perform those services.

And finally, finishing up with other income, which includes animal citations, business license reprints, uh mandated programs, and then some some other slight rebates and miscellaneous revenues. With that, I'm going to take a drink of water, but I'm available for any questions. Okay, we have no uh public speakers today. Um, so where to start? Do we want to start with animal licenses, cell phone tower revenue, or no, I'm just kidding. Um, but we a lot of discussion here. Um, as we navigate through this discussion, Greg, maybe you can help us uh with this. Or my question is, do we have to take action today? Is it good to take some action today? Is there any merit to waiting to when the new city manager gets here? What would finance actually do if we actually make any changes to our revenue assumptions starting today? uh versus waiting till the city manager gets here.

Uh I mean finances process doesn't change a lot. I mean we're going to continue to collect the revenues and analyze the revenues. The the reporting to council is what changes significantly without any action from council. We we can't we we would not have a basis to update the 10-year plan. We would have to wait for the new city manager to come in make recommendations to council. Council to then vote on those recommendations. So effectively uh council can provide us direction with to any and all of the revenues. Um, I think the last meeting, uh, council member Odette pointed out that there's probably four or five that are, in my opinion, worth talking about if council so desires and we can get those revenue assumptions and and start to work towards updating our our financial plans if if council will provide us that direction.

Okay. All right. So, it might be easier to start from the top of our slides just to see what kind of discussion, ideas, thought processes we have. It was definitely a lot of content. So or um if the council would like maybe we start from the top with our sales tax revenue unless we want to go further back or is there any thought process you want to start with that? Okay. So I'll open up the floor if anybody has any discussion on sales tax revenue from the slides that we got in the information. Is there anybody that would like to speak on that?

I'm not seeing anything. So, um, what's that?

Yeah, I see everybody there. So, you're up. Yep. Um, so for the three scenarios, the super conservative, middle of the road, or downside, um, I would be making a recommendation to go with the middle. I think it makes the most sense as far as just doing the numbers, um, on the rate of growth or the declining growth um, over the last three years. Obviously, Carfire, COVID stimulus checks, there's some oneoffs there, but if I just go for the last three years, um I think your middle assessment makes the most sense to me. Um as far as rate of growth, um not just year-over-year, but we're looking at it from a budget perspective of is it going to hit hit the mark? We're down, you said negative 6.5% year to date at this point. uh relative to the projection. Yeah. 6.57% proj and I I only make that distinction because it's important when we're setting the assumptions. We talk about it year-over-year and so um I just want to make that distinction.

Yeah. Yeah. Super important distinction. The I I think the reports that you gave us are very clear and you gave it to us in so many different ways to make sure that we fully understood it. So um given all of the criteria and the reasoning that you gave us as far as the change in the economy, what MUN services had recommended the lowering of the outlook

um for the economy as a whole, I mean the good part is that um in another year they're going to start the process of redoing the the next two-year budget. So if some changes needed to be made or if things turned around, um you would be able to do that. But as far as really setting what our expenditures need to be, I think it makes complete sense that that second one given all the criteria you said. And then also it basically assumes a 2.3% rate of growth. Um and so I think that that is perfectly aligned with um the trend the what it's been and and I think the direction that it's going at least for the next couple years. So that makes the most sense to me. And on this specific one, I would make obviously I would make a motion to um pick scenario two, the midline recommendation.

All right, Councelor Resnner, I just wanted to uh I was going to ask if you were making a I hit my button before you were done talking. Um so I was going to ask if you were making a motion and I would second the motion of the middle for all of the reasons that you stated. Forgive me for being in the bathroom. Um she made a motion to approve in sales tax um the middle scenario. So that was page page five middle of the road. We'll call that she gave lots of good reasons but and I seconded that motion. Do we normally make motions on this or do we take consensus to help me on this? So but I mean

yeah it really your discretion. Um, anytime there's a decision that involves a lot of decision points, just having even a straw poll or some sort of vote would be helpful for each step. Yeah,

I like the middle option. I'd almost play with the idea of going to option three just because we can see the value that when we do underestimate and when the results are better, it does give us more wiggle room. Um, as we've seen in the property taxes, we'll get into that a little bit later. Uh, however, if we went to the option three, it would just mean we're just making more cuts. We're not creating more revenue today. We're just trying to find out how much actually has to be cut. Um, so I I like the option two with the flexibility. We'll revisit this again in the future and see if we need to make more adjustments, but I think it's a good starting point. Um, so we do I don't see any other speakers. Um, we do have a motion. We have a second. How about we vote on that and then we can move on to the next thing. So, all in favor on that?

I I Okay. All right. We're rolling. 50. Uh, property tax. Um, that's the next sales tax and property tax are two biggest revenue sources. So, um, and I was pretty pleased to see that that did surpass what we forecasted. But, uh, any thoughts on that? I don't see any speakers, but we do have a couple options that were presented to us. Can Oh, perfect. You went Did you want to review these again? A little bit. A little bit. It was like 64 slides ago and so I have some notes on here that scenario one was aggressive. Described as aggressive.

I mean, we're moving pretty quick. 50 slides. Do you want Oh, you shortened it from last week. Thank you. Do you want to give us the cliff notes version again, Greg, on our three options?

Yeah. Yeah. I'll walk through it again. Um so basically scenario one all scenarios utilize the same kind of basic starting point which I think is important and that's trueing it up to what actually occurred in fiscal year 2025 which was slightly higher um than what um we we forecasted a year ago let's say. So it's it's taking that as the starting point of fiscal year 2025. Um, and frankly, all four scenarios that are outlined here, or all three scenarios, sorry, utilize a 4% for the for fiscal year 2026, which is in line with what we've seen through January, which was up 4.16% year-over-year. Um, and then scenario one would utilize a 5%. The rationale or thought process behind putting that out there for consideration for council was the average historical growth amount um which was about 5.5 5.6%. A scenario two um would use 4% in FY26 growth over FY25 and then utilize the same as the adopted budget of 3% thereafter. And then scenario three would say, hey, um, for lack of a better term, we want to be conservative here and you utilize you recognize the 4% for the current fiscal year and then utilize a long-term growth assumption to 2%.

And council dead, I'll get to you. Uh, interesting that we didn't see a scenario maybe just keeping everything at 4%. We we see we um but okay, councelor debt, I see you. So,

um yeah, so I ran these scenarios and I do think I'm all in favor of of um like correcting where we started, especially since we started higher. Um I'm inclined to stick with the recommendations like or what our budget actually is. um because the the drop from um 23 to 24 to 25 if you if it stays on that trend we will see like a 2% increase. So I actually think 3% is a good number. Um I ran all these scenarios several times. I know it basically gives us at least if we change it to what it is, it gives us $81,000 which I think is good. Um, but I I I was trying to see like maybe maybe we do three and a half, but I when I ran for conservative, not conservative, I think at that trend in that rate, it would only be it would be 2% growth. But I So I think the 3% we should keep it also because like our pro like our sales tax is down 6% this time, but we're not going to go down 6% because over the year it goes up, it goes down. Um, I don't know that I would rely solely on the fact that it came in on the first trunch at 4%. And I honestly like I'd like to win something like so if we beat this one and we like get this one over, it would be nice if like we overachieved maybe on one metric and I feel like property tax has the best chance to kind of win that metric and and it's was as predicted which would be a second win too. So, um I'm inclined to stick at 3% just given weighing all those sides.

Well, I Yeah, I I feel that too. I I just don't change it. I feel exactly what you're feeling. It is nice to win on that one because the sales tax is so volatile and difficult to predict that we're winning right now when property tax is exceeding what we budgeted for with the volatility of sales tax. So, I um just keep the way it is for now. I think there's a 50 consensus. Um, do you want to

There is a slight There is a slight distinction. I I think that council member Adet is saying versus what maybe some of the other council members are saying. I think council member Odette is suggesting and I don't want to speak for you, so you can jump in at any time, but I think council member Adet is suggesting that we recognize that FY25 came in slightly better than we had forecasted with the adopted budget and then utilizing the same assumption that we utilized in the budget kind of I don't want to say ignoring but being conservative. um so that we can get a win or whatever you want to call it. Utilize 3% even though we're seeing a trend that might suggest 4%. Utilize 3% um for all years of the budget and ignore the potential 4% data point um for the time being.

I mean, I'm not ignoring it. I'm hoping for it. I'm keeping it close to my heart. But I do want to make sure we I would make the motion to to correct it so we get that 81,000 increase, but then keep it as projected at 3%. Yes, I I'll second that one. Okay. All right. Uh, let's vote on that. All in favor? Look at us five. Oh, it already I was voted for again. You did? Okay. Yeah. Must be dimminion. May I just clarify that it would be changing to a 3% assumption in fiscal year 26 and going forward. It would keep it as budgeted, but we would recognize the actual number for 25

effectively for the the benefit of the audience. It's not one of the three options. Yeah. I mean, exactly. But yes, it's the best option. All right, we are getting closer to the end of our slides for animal licensing. We can get there lay at last, but uh transient occupancy tax um was there any thought process why it went up so much from 21 to 22? I I I'm just trying to think what happened in those two years. That was a because of the co. Yeah, we well co was do we recognize that? We're saying from people started traveling in 22. Yeah. Kind of that builtup demand of travel. Okay.

And maybe people weren't quite ready to get on airplanes. This is this is purely wild speculation, but people weren't quite ready to get on airplanes yet, but they wanted to get out of their house. Maybe they heard that Shasta County was open for business cuz uh I think it was pretty well known we were open for business. And uh people traveled up here from the Bay Area, LA, maybe other areas. I mean, I could tell you I went to Bernie Falls at some point in there and I was shocked how many people were there. So, um I think that's what it was. It also looks like that it jumps in 2022 to 8 million and then it drops down to seven, but then it sticks and hovers right around 7 million. I know that there's percentage increases and stuff over there, but the actual numbers

sort of jump and stay somewhere around seven. So, that maybe we're going to stick around there. Yeah, we can just stay with it the way it is. You want to change it? Um, one last qu question I'll have is the we've recently talked about the paroleies that um have been staying in the hotels that are not paying to tax because when they're over there for longer than 30 days. Do we know how much of a hit we think we could have been taking from that or there's really no data? There's no data. Yeah, because anytime you're over 30 days, you're no longer considered a transient by the purpose of our municipal code. Um, so they wouldn't be paying transient occupancy tax if they're over 30 days.

Okay, council dad, I see you, sir. Um, so on this one, uh, you know, you knew I was going to go to the downside at some point. Okay. So, I will say that, um, in 2022, that was kind of the boom of our Airbnbs as well. People had cash. They were putting it into their properties or buying properties and doing Airbnbs. And then in 2024, um the council, not myself, but um really clamped down on the Airbnbs and that actually reduced our revenue by 5.4% um for uh Airbnb revenue. And so I do think that that went away and that isn't coming back in the same way. I think our Airbnb market has not done well and because we've constricted it, it's it's not doing as well um as it could. So I do think that the trend is is continuing. My um I was so I think that going correcting the the first year um and then going to a I would go with number three the 0% and then I'm comfortable with three. I would even be comfortable with going possibly to three and a half. I was just trying to think of like if you add Iron Man and and they estimate best case scenario is 345,000 it does make sense that you know you may get a 3% bump for that maybe three and a half if you want to be optimistic um but I think it was the third option was wise in that um it sort of keeps it flat um so we we're not losing you know if anything you know because our reserves are low if we overachieve we're replenishing our reserves um we wouldn't be actually overspending. So, I I want to go with number three um for especially since I don't know, you didn't really give us the current one, but I know we're we're just coming out of our high season, we're going to go

into the low season. So, I don't know if those numbers are going to make a huge difference, but So, so when we forecast all of these revenues, and I I think I failed to state this,

um we try to reflect the seasonality of all of them. And so when I make a comment that relative to projections, it's important for council to know that that is taking into account that seasonality um of when we see our high months, our high months are certainly during the summer months starting in May or June. Uh lasting into September, October time frame are our highest months. Um it starts to tail off a little bit through the winter months. Um, but through January, like I say, we're right in line with what was forecasted, which was the 4% increase. Um, so that's just the data point for council that that's available as of today through January. Basically, we're in line with the 4% increase like ever so less than like close to half a percent below, I guess, is what like

Yeah, I mean like 3.5. Yeah, I would go up. Were you trying to be koi there? No, I I wasn't. I was just trying to give you the data. Well, that that's sort of where I landed, too, is like three or three and a half. Like I could I'm I would be okay with either except I'm trying to re we're trying to replenish reserve. So, if we miss it just a little bit, at least we reduce our expenditures as a result and then we would actually replenish. That's kind of what I

would this be the appropriate place to have the discussion to where maybe as part of our motion. We've talked in the past about um creating an ordinance where Airbnb taxes are paid automatically and collected. Um I I've I've heard that stat in the past by prior council members saying that might give us a one-time boost or help increase revenue, but I don't know if this is the appropriate place to have that conversation, but I'm curious why we haven't gone that route as we found value to that in the past. That That's in the pipeline. It's in the pipeline. Yes. We can't get it done when you're leaving. So, yeah. Well, we're going to try and wrap some things up by next week. It sounds great. So, yeah. No, that's pipeline. Okay. Um, counts. I missed you. So, I'm sorry.

That's all right. So, our what is our last three? We've been zero for our last three and am I correct? And then we're estimating five for the next.

No. So, so our our historical average has been basically the the last two has been roughly zero. The year before that was -12, but that was coming off the large increase um in FY2022 as we talked about with the kind of pent-up demand for travel. So, effectively, if you look FY23, FY24 and FY25 are all effectively flat after we came down from that large amount in fiscal year 2022. Um your question is about those years. question is how do we then how do we if we're all flat for the last three years, how do we get to 5% or 4%? Yeah, we use a 4% assumption in the long-term plan.

It's it's frankly there's it's it's an imperfect science to guess what's going to happen with DOT and so we always um have used that 4% generally it doesn't hurt us too much or help us too much. Um there are years where it helps us a tremendous amount like when it came in at 8.2 million. Um, so we just kind of that's just there's four three or four revenue assumptions built into our 10-year plan. We have a specific one that calls out property tax, a specific one for sales tax, and then it's kind of just all other revenues use this 4% number that we've used forever. Um, and so that was kind of the number that was used when this revenue was was forecasted. it is coming in in line with that um through the first seven months of the year, but um you never know how that might change and it could change quickly. So um depending on council's appetite, I um depending on the motion, I would like to get clarification on the conversation between council member

just maybe we go first year next year at 2% and then three and a half. Oh, so instead of zero Oh, I definitely think we're not going to go above. I mean scenarios. Are we I thought he just said we're trending it on track at four um through seven months. So I don't know that we are. So I but I don't have the latest numbers. I only had through November. In September we were we were 3% above but then November we were 1.4% above. Did we go up higher? No, we're basically right in line with the budgeted

projection. So we were we started up high in the high season and now we're coming into the low season. So, I mean, I think that's that's the hard part is that we're we're coming into the low seasons. So, it's if we do well through the low season, then I think we could go back up. But I just 2% is not a I mean, he said it really doesn't

The other thing I'm going to mention, I didn't say this as I was answering Council Member Mun's question, but it it's important to know the ramifications of a potential miss. And in this revenue, it's just not a large revenue. So a 1% miss, let me find my amount, is about $75,000, you know, roughly. So in the scheme of things, you know, it it's not a large impact to the general fund, positive or negative, whereas when you're talking about property taxes and sales taxes, um it's a you know, 1%'s $350,000 roughly, and three 300 to 350,000. So, I I just want to point that out to council as the discussion ensues here that um we're we're kind of imperfect and the consequences of imperfection in this area aren't as substantial, but it is an important thing to keep in mind.

So 2% I think is then probably a good halfway for this neck is for this current year to do 2%. Yeah. My only concern about that is that I know Iron Man's coming, but that's next year. That's next year. But we're going Well, isn't quarter four more of an upswing? Quarter high season. Yes, Q4 is a high. So, I mean that's what I'm saying consider. And I'm going with the three and a half%. Um

I would do two and I would do 2% for this year. So the data is there anybody can answer that question about our occupancy percentage as far as is our beds being taken more? Do we have I don't know if anybody that can answer that question is here today. Yeah, there is in the back. I don't know if she wants to I don't know if she wants to answer that question. But if she does because the only way our revenue goes up is if we build more hotels or if the rates of the hotels go up or the occupy factors the the rate at which they charge and the occupancy is my understanding. And then of course available hotel rooms if we build more hotels. Right. Well and Airbnbs also. So if people are actually paying that.

Yes. And if that ordinance is coming, do we have any data points that could say this is how much it could help us? Like we collect 50,000 more a year or 100,000 more a year because we know there's some people that are maybe not paying their Anecdotally. I've heard some people that are very optimistic that it could raise up 200,000 a year. I don't think it'll do that. Um I know Jeremy's team watches a system that uh tells them people who are not licensed Airbnbs. So, I don't know if uh Jeremy's team has any recent information on that. Um yeah, we could we could probably provide that to council off off agenda if they so chose up to you. Jennifer, would you like to come up or do you like to hide in the back? So, um no,

you just have to ask her what you're We were just kind of curious about the trends of occupancy. Um are you able to speak to that or maybe not? I can't hear you. She's saying not this moment. She can get it to you. That's fine. Okay. Dr. Danuka, were you going to speak or No. No. Sorry.

Um I was going to attempt to wade through what I heard each each person saying. Um a little bit of the downside scenario, which is scenario three, with some exceptions. Um fiscal year uh 2026. I heard a 2%. Um, and then moving forward from 2027 on, it seems like that we are wavering back and forth between 3% and 3.5. Um, I'm good with either.

I think that I could go with either one. Being that 1% miss is 75k, we're talking about $37,000 of saying 3.5. So, I'm fine with saying uh 2% and then 3.5 if everybody else with that. Yes. Um I'll make a motion as such. I'll second. All right. No other discussion. All in favor? I I guys, we are doing really good. Um on to cannabis. So, which is also another revenue source that's less than toot. So, um, just leave it alone the way it is.

I don't know if we want to make adjustments on this. Has this really caught anybody's attention? I do. You want to make Oh, councelor dad, I see you. So, I I'm not here to disappoint anybody without opinions.

Okay. Um, so I Okay, so I these are there's a little I have a little bit of of um the way that this is written. You put them to you put them separate and then you put them back together and then you kept them together. So, I don't know how. So, follow along as best you can with where I'm going, but um for the other taxes, we have doubled our decline. Um obviously those numbers are coming down. And so when I'm looking at the other taxes and Greg and I talked about this um given the what we've actually collected I think for other taxes July through September we were down 13.3% but then through November we were down 38.17%. So that is trending quite negatively and I think it then trends with what it was doing and so conservatively I think I would want to go with like a negative 3% on the other taxes. Um, and then given the outcomes of what's going on and then just that trend on on the year-over-year trend. And then for the cannabis tax, it's just it's a it's a lot of math. Okay. So,

sorry. When you say other taxes, you mean other So, on the front page, there's like an other taxes and then then there's cannabis taxes. They're separated here, but then they're combined later. So, I'm just going to tackle them separately so that you can

you're tracking with me. Yep. Um, then I then I tried to do some math um with the square footage cultivation because that's not something that would change if we added $2 to uh and you increased it by whatever the percentage is. I'm trying to figure out what I think is it here. It's stating that we're probably going to end up having a 28% or 20 about 29% growth. And if I if I did math, which I may have done that wrong, but um my estimation with the numbers provided is that it's probably closer to 23%. Um given that the cannabis was down 37% July through September and then down 11.6% in November. So that's trending a little bit better but still down. You had mentioned that they we haven't collected taxes or we're just starting to.

Yeah. So what happened it was it's implemented as of July 1st. Okay. And so our fir the the first receipt that would have been a data point in the current fiscal year was actually using the old tax rates because it's the quarter ending June 30th is due in July. Sure.

And so you have this kind of data anomaly going on where the tax rates were increased, the assumptions were increased, but we we've only now received we just got our second set of tax returns. Um, and so there's a little bit of I'm going to call it data noise because you have kind of a mixed bag of what tax rates were charged on those tax returns. Um, that that's what I was trying to articulate when I was discussing that is just this lag and when it was actually implemented to when you see it on tax returns that are filed with our office.

So given the trends that you're seeing, are you still feeling good about the 28 29% or is something a little bit lower? Uh I I would not say I feel good about these revenue forecasts because of the macro issues of um what we're seeing in the cannabis industry at all. Yeah. As a whole. Like if you you know I'll go back a slide just to help contextualize what I'm trying to say. Yeah.

But this slide right here, right? The the red line is the cannabis taxes and it's been in a kind of a steady decline. So what we were attempting to do when we built this budget and it's challenging is there's pretty pretty large increases when you look at it as a percentage basis um relative to what the rates were to what they are now but you also know that revenues are going down. So how do you you know we didn't just go in and increase and say oh it's going up 67% or whatever the the increases were that council voted on. And so we're trying to match those two things up and frankly I just don't feel confident enough in the the lack of data points right now to give you a good answer on that. Can I ask have we in increased our licenses for cannab cannabis cultivation or retail? No. There

have we decreased our retail? There is one retail license that went out of business that I don't believe has been replaced. Um sorry I'm looking at the city attorney, but I don't know if he knows. Yeah, I believe there's one that went out of business and we haven't replaced it.

So, I do know that um it's the city manager that approves licenses and I know I was approached by two different retailers and a cultivator wanting to come into town, but I'm assuming that that whole process was stalled with interims, but that hasn't actually implemented. we could really we I believe the first time when we um issued the licenses that have been granted there was an RFP process and went through a pretty thorough review process amongst uh not just the city manager but I believe the director of finance was included. Um uh I believe the development services director was included. There was there was a lot of members that sat and reviewed those applications for um continuity of business. You know who are these individuals, things of that nature. So, we could if council directed staff to um as soon as the city manager was here, we could release an RFP to try to fill the vacant license if that was council's wish. Um I I will add to that actually I believe the ordinance allows uh for more uh cannabis license if if council was uh open.

I think it's up to the city manager as far as I understand is that it's it's his it's at their discretion. Go ahead. I I'd have to look at it, but my recollection was the number gets set by council whereas the individual permits might be by the city manager. Yes. Yeah. And we still have permits. Yes.

So, okay. So, I'm just trying to figure out if there would be another reason why there would be possible increase because from my calculations, I would think that we would probably be increasing it by about 23% on the cannabis side, not 29%. And then we would be actually going down on the other taxes where here it's um put we have it at five and a 5.7%. So the total because now it goes back to being together. So forgive me if I'm but I'm thinking I'm looking at scenario two but instead of a 3.6% increase total I'm thinking it should be a 6.89% um increase. I don't have calculations for that. But if I combine the two, if I combine the two, if I go negative 3%, positive 23%, because we are going to get a boost. That cultivation number is a $2 per square foot number. We're going to get we're going to make more money just on that. And it is a percentage increase. So we should expect an increase. Um, no. So once I, now this is going to get really weird. So now I'm putting them back together and the total increase would be 6.89% is what I'm

Yeah. I would like if you're okay with it, go ahead and talk about them separate because then I can actually go back and calculate them separately if you'd like. Um it's up to you. Okay. Yeah. However, that way it's I just feel like it might be easier for you all to have a conversation with them separate. the advantages of

I would be totally fine to separate them for the purposes of this conversation to to go to a negative 3% it would it would make the other taxes the fiscal year ending 26 2411 if you assume a negative 3% year-over-year um growth or decline however you want to say that um for on the front page for it would be negative -3% on that. It it it won't your final number won't be neg3 for this category because they're combined, but just for that specific category. Yes. Are we tracking? So, you want to state that? Do you want to state that for the rest of us again? So, what we if you're are you making a motion?

Sure. Should I can I do them separately and then you put them together? Okay. So for the other tax, well, can you are you tracking with that? Does that make sense? Okay. So for other taxes, my recommendation is to change it to a year-over-year negative 3%. And then what I but well this is the other part because I didn't combine them. I don't know what that year what ongoing we should set it at. You usually what we do with other taxes um just for the benefit of council is we arrive at a an estimate and we keep that estimate for two straight years and then we just let that standard growth rate that I told you I told you in the 10ear plan we only have certain ones delineated um based on the motion earlier. I'm going to have to add one to that but um we just use the standard 4% thereafter and as I mentioned it's it's pretty small consequence when you're talking 2.4 4 million. Uh, but if council wants to direct us to add another growth factor in there, I could certainly do that.

Okay. So, my recommendation, I'm just going to tell you my recommendation as a whole and you can tell me if this is off because it's basically somewhere in between your number one and your number two. Um, it's it's a 6.89% and then basically zero that out the next year because I don't think that cannabis is unless you think something's going to happen. I don't think that we're going to get a boost in cannabis. I think we'll probably steady that out. we're going to get that new money and it's probably going to stay pretty flat after that and then a 1.5% increase because I know we're going to redo this again um in two year or in a year. That will just take me longer. If you do four, I would be fine to do four if if that's the state.

That was going to be my only caution is it would take me longer to build that out in the 10-year plan. The way the 10-year plan is built, I don't have a a specific growth factor right now. So every single growth factor that we add during the conversation today in those out years, it would be more work. Year one and year two, super simple to do exactly what you're saying. Year three gets a little more complicated if you're wanting to split all these ones down into separate nuance.

I would be totally fine with keeping it at 4% for the out years, but I do think that for the next two years to get a really good grip on it, 6.89 and then a zero, but I'm obviously open to if you guys have a different opinion on that second year. In the first scenario, it's 1.6. 64 and the second it's four but I think we're going to we don't know what the bottom of that is yet. So just to simplify this can you state in one sentence what so yeah what you're thinking that will be the miracle. Okay so I would I would choose scenario two

but I would change 2026 to 6.89% 98 9% and I would change 2027 to like a flat growth like repeat um and then keep the 4%s for the rest. All right. Thank you. Is there a second to that or any other discussion? Sorry. When you said flat when you said flat growth, were you thinking because this this is we have fours all the way. When you said flat growth, were you thinking also 6.8 8 or were you just uh I was I just want to make sure zero I think it goes zero 6.804. Yeah. Yes. And that's just for the other taxes. No, that's for everything. That's the total one. Oh,

I know because I had it. I know.

So to just to quickly on that one on the on the cannabis one, I think it is going to increase. I don't think they're listening. Hang on. So sorry. because I'm just trying to figure out why we're so high on cannabis and then we bring it down so low because she's trying to explain it to me. But so the cannabis one we increase the fee and we increase the tax. So we will definitely make more money. I remember it's just a matter of how much more we're going to make. But they other taxes is a different category. I got you. But a portion of that hasn't come it hasn't changed yet in what's been so it will change. Yes. That's so we know there will be an increase. All right.

That's why. So I'm basically projecting a 23% increase in cannabis taxes. All right. I understand now. All right. If you I'm going to second that motion. You're going to second the motion. I don't hear any other ideas. So we're going to vote. All in favor? I I I I don't think we're uh we're not voting on anything. We're just um Let's see. Moving on. To simplify this. There's about 50 more slides. We may not want to visit every one of these. Is there something that catches your eye that maybe simplify this or um because we're moving on now to the next

that feel um extra pertinent to me at this specific time. I did think it was rather concerning that the airport captain situation, but I'll leave that discussion for a different day. Okay. I mean, council, you were on a roll of almost 10 motions, so we can keep going to get double digits if you want, but um is there anything else you want to be a um anybody else? I just had questions. I don't I don't have any recommendations for anything else. I But I did have just a couple of questions. Okay. If anybody else had Yeah, you got the board. Let's do it. Um I don't know which order. Um

no, sorry. Oh, go ahead. Go ahead. Um for I guess we'll just start with the internal. Is that what the next one was for cost allocations? Um are those like subjective or it is it just it's people's how much people get paid. So you bill your time. So based on how much you're paid that may be the up or down.

So So what happens is is we look back and we look at how these services are actually used. Um I'll use a department like my own just because I kind of know it the best. So, so ours is based off of um the the number of AP invoices that are paid, the size of budgets because we help departments manage their budgets, um the number of FTEEs because we pay employees um through through the finance department. Um I'm forgetting one off the top of my head, but we use those factors based on the actual data and their actual usage of these things to determine how the costs are going to be allocated. We use a look back methodology to see the actual costs incurred and try to um effectively marry that up to the budget that that's happening. So um so you're not missing any major cost increases that might be occurring in any one department. And then effectively we just go through and allocate it so that the departments that are using those services whether it be finance or city attorney or city manager's office are actually um receiving the estimated costs based on the allocation factors that are used. Um unfortunately in the revenue deck there isn't those a full discussion about those. I actually embedded it within each of the the department area as a more robust discussion about those factors. And so I apologize I don't have more of those.

I'm just curious just I'm just curious and then for the gas tax transfer should we for the record for clarity should we assume gas tax is never going to be told to us it's never in the reserves because it's a it's a general fund but it's not a reserve number. It's a general fund number so that cash is coming in and out but when you talk about reserves we would not include anything that has to do with the gas tax or the gas transfer. the gas tax. Yeah. Um it's a little confusing because the streets departments live within the general fund. And to be honest, I think this is a byproduct of many many years ago when the general fund actually could contribute because we had available taxes to street improvements. It made sense that the it would live in the general fund much like development services where we subsidize the activity so to speak, right? So, if you're taking a piece of your taxes and putting it towards road improvements, it makes sense for it to be within the general fund. Um, frankly, the way the gas tax uh report is required to be done, um, there's a maintenance of effort required on the general fund's part as well. So, it also helps with that tracking to keep it as part of the general fund so that you know the different pieces that are being supported by each. But largely to your point, yes. um the gas tax revenue that comes in is held in a special revenue fund separate from the general fund and we only transfer money in as the costs are incurred. So the way the budget is built is I say effectively zero with our maintenance of effort built in there. Right? But effectively it's zero to the general fund with the exception of the required maintenance of effort that was set many years ago um when the gas tax adopted the maintenance of effort requirement for cities. Um so we keep a separate reserve for that. Um, currently, I want to say it ended last year somewhere in the neighborhood of $20 million. Um, so that's not entered into the general fund until the expenditures are incurred. And then at the end of every year, we reconcile the amount of expenses that are incurred. What is the

amount the general fund is required to pay per state regulation? And then we transfer the rest of the money in per what we're allowed to do to the general fund. To the general fund. when you report to us what our reserves are, those are those will never include gas tax because those are encumbered funds like for specifically for something. By law, you have to keep track that that gas funds are spent on gas funds and that if you're talking about our reserves, it would never include gas tax money.

But any given day during the course of the year, we haven't done the final reporting for gas tax purposes. So the the cost, let's just say um through December we've incurred $5 million of cost. We have likely not re reimburseed the general fund for the full amount of that $5 million. So the the general fund reserves at any point in time will certainly be lower because we haven't reimbured the general fund from the gas tax fund for the amount of the cost that we're incurred to the general fund or to the general fund reserves. To the Are you calling them the same thing? So, so the cash report that comes to council on a monthly basis is a cash report. Um, the reser when I use the word a cash flow issue.

Yeah. Yes. It's a cash flow issue. When I use the word reserves, I actually am trying to convey the 10-year plan reserve policy as 412 outlines. Right. And so those are different. Um, I would think of it this way if you're talking about the reserve policy that effectively streets as no impact on that. That's our goal from a budgetary standpoint is that the only impact to the reserve is the amount that we're required to m the maintenance of effort

and there is no other impact. So if Michael's team hatches up a budget of $15 million next year, we're going to look at the gas tax reserves, make sure that there's enough reserves there to support that level of transfer into the general fund. And then effectively you'll have $15 million of expenses in the general fund and a $15 million transfer expected from the reserves. But that would never come. That would never come into our report as when you're reporting our reserves, our general fund reserves. That that would include or not include anything with the gas tax. Does not include gas tax. All right. Uh councelor Reser.

Um I'm glad you mentioned reserve policy. Um because I was thinking while we were talking about rolling stock and I'm unsure whether or not this is the appropriate place. Um, so, uh, city attorney will cut me off if it's not. Um, but when we were discussing rolling stock and how much we have cut to that and I remember being in scenarios where really it's apparatus and vehicles and how long it takes to get those and how expensive it is. And I was thinking because I also have been thinking about our reserve policy when we moved it from 5% to 10%. And I would just like to tell this council that in a perfect world, I would love when the new city manager is here to have discussions about moving that reserve policy even higher or having a long-term goal or setting aside a certain portion so that we could build that up because I was thinking in the rolling stock scenario um I would I would love to set a new standard and maybe it requires a fourfifths vote but in times when we have to cut back you could and and staff comes to us and says, "Hey, money is tight, but we need to spend a million dollars on apparatus for police and fire or what have you." That would be a potential scenario that if we had a hefty reserve, there could be four fist vote that we were tapping into that. But maybe that moved us from like 30% to 25% or or gave us like some cushion for when emergencies happen. Um, and we have to then and and we're also in a financially tight scenario. That's just my long-term I'd like to voice to us.

You can speak if sorry speak to that. Yeah. I didn't mean my my comment to that would be it's obviously very aspirational at the current moment in time with our reserves, but a girl can dream. All right. Yeah. I you know I think there's a lot that you said if there's head nods amongst council that we can work on and return to council at some point with modifications to our reserve policy um and a number of other financial policies that I think we'll we'll be evaluating over the coming months. Um if everybody's open to that

obviously we're going to have to talk about expenditures and such first but long-term planning goal. I anticipate us to having a lot of discussions about long-term finances. That's it.

Yeah. So, I think it's just an idea for now, but my my thought process would be that we have a $10 million shortfall in our roads. And I would like to try to focus on putting more money towards the roads and while at the same time having that thought process to doing a good job with our reserves. But, you know, I would um as our roads suffer more and more, it just adds more stress to the future. So, while we can build a deeper and bigger reserve, the expense of those roads as we neglect those is just going to far exceed, you know, the the good work that we could do to increase in that reserve, but yet we're going to have a bigger cost down the road because we're neglecting the roads. So, that's just kind of my thought process until we need to get our roads in order to to the right funding at some point. So, councelor Adet, I see you. So,

um, to that end, is there any way to find out or look into if since we're getting 10 million a year in gas tax to bond on that so that you could actually fix the roads at once, you do a $50 million bond, you have your 10 million to pay for that and it gets all your roads done at once. Do they do that? There's other risks I would think of operationally that I would want Director Webb to speak to, but I will also say I would need to look into the gas tax code sections whether that's even allowable. Um I I we've never done that so I don't know if it's allowable, but I I could do some research and maybe at a future date we could return to council with a more

robust conversation about what the options are there. Yeah. Um if we were to explore something to that effect and I know count I know city attorney is want

Yeah. So, um I I do think there could be more discussion on this, but I do want to make sure that you're aware. Um generally speaking, the the prohibition on public indebtedness prohibits you from using future tax revenue as a source for any sort of loan, including including a bond. Um there's a handful of exceptions. There are what I might call creative workarounds that involve sale and lease back arrangements of of city property, your classic certificates of participation, but likely you're not actually going to be able to use the gas tax revenues themselves as guarantee council. I was gonna ask

manager web about I doubt there's any CIP projects that are already fully funded for roads that we were talking about earlier today. Yeah. Can you repeat that please? Well, are there any project because we you had said we have a lot of capital improvement projects that are fully funded. Yeah. Our current and I I'm just curious if there's any roads in that. I mean, I I would suggest there might not be, but you never know.

There are a number of roadway projects included in the capital improvement plan. Um, a number of them are fully funded. If you recall from the presentation that I provided um a few meetings ago, um the value of the capital improvement plan is roughly threequarters of a billion dollars. Um and roughly 500 million of that was fully funded. um with the remaining uh 250 million or so worth of projects not having a fully funded um financial plan. So So what that means to me is there's there's roughly about $200 million sitting out there of unfunded needs which vary throughout the city um in touch um pavement um to Mayor Lat's point um as well as our aging uh fireh houses and other infrastructure um throughout the town community services infrastructure. So, um it there's definitely a pavement need. Um but I I would say there's more than a pavement need around town. Um sidewalk is another area that is in um desperate need of some repair as well.

Uh councelor Danuka.

Well, I wanted to ask you about the revenue from sale of properties and uh I know there are some of the properties which have been sold and some may be in pipeline. How do you can you just go to that slide and see if we need to make any changes in the revenue assumptions there? So, so um the sale of property would be if council okay kind of two parts. One when we sell sell a property our procedure is to deposit it into the the capital general capital projects fund which is not the general fund. As council may recall, in October, we came to council um as we typically do when there's a large amount of money in that fund because technically the policy and frankly the law is that those are general fund monies. So the question was posed to council um in October, do you want to move this money from the capital projects fund to the general fund? And not to uh restate what what the conversation was, but briefly council said, "Knowing that there is some future need out there, we're applying for a grant um to to finish the road to the to the bridge. We'd like to leave that money within the capital projects fund at this time. Um if council wants to revisit that, they can direct us to bring that back at any time council council wishes because um it is general fund money. It's just set aside right now in a different fund with the with the intent or the purpose of knowing that there's a large amount of work to be done at Stillwater that currently does not have a funding source other than in a grant that we applied for that would cover approximately 8.2 8.3 million.

If I could clarify just a little bit more um I think there's a little bit of confusion because it sounds like we're saying it's general fund but it's not in the general fund. U so but uh this is coming from the fact that lawyers uh have used financial terms in a way that ends up being different than their actual financial usage.

Okay. So, so just to follow up on that thought, u what I'm trying to understand here is of course we have this separate project we want to use that in the future but at the same time as you pointed out earlier when we are deciding the re reserve policies we have to find the best possible optimum balance between the present and the future because if we our present suffer so much that if our roads go bad or infrastructure goes bad or civic shuts down whatever happens that can affect our future projections also. So I would like this council to think about that. Is there anyway and I'm not advocating for transferring all of it but can we find a good balance that we can use that sum for now and maybe that is some some of the money we can use to float a bond because we cannot use the gas tax to float a bond but maybe some of that money we can use to float a bond for the projects because the reason I'm saying is if you're going to keep it for the future let's say 25 years from now for the sake of argument argument then the current generation will suffer with the roads breaking down and services. So we have to find a right balance. So something to think about.

So what about um essentially it's a big subject but what about entertaining just to ask staff at some point to come back with a presentation with options. So maybe that might simplify the process if there's interest. So let me just clarify what I'm asking is essentially to for staff to come back with a kind of an option for us to see what is the best way to use that money and maybe we divide into four different buckets which is present investment in the future and some of that for the different use. So does it make sense to you guys want to see that? Open to information. So council got

Yeah. So you're talking about the Stillwater money. Well, slaughter may be part of it, but uh uh there may be some other whatever that comes out in the future, but there may be some other money sitting from letting Nigeria. So, so all of those things I'm saying that I would like to see a plan that some of it gets used to float a bond and some of it maybe we can use now and some for the future. So, so I do want to stipulate one thing real quick. You mentioned rancheria in the same breath as the property sales and I know they're different. Yeah, I know they're different. One is in the general fund. We would need it hasn't been recognized in the 10-year plan, right?

So, if council so wishes right now to recognize that as a revenue in the 10-year plan effectively, if if we don't recognize that as a revenue, at some point staff's going to return and say, "Hey, you have a $3.2 million revenue that wasn't budgeted for." Um, and recognizing it effectively gives you a one-time revenue that would increase the cash from the the beginning of the fiscal year to the end of the fiscal year, assuming there was no expenditure tied to it. It's a roughly $3.2 million revenue. That is very different than the roughly $4 million that is sitting currently in the general capital projects fund for property sales waiting for council directive or decision on.

Right. And I completely understand that those are that's I understand that I just put mention that there because that is another revenue which we have not recognized in the budget and I don't want to recognize that in one year because I'm going to use that wisely some of it now some of it for the future some of it to float the bond so but that is just something I would like to see if council wants

can I just have a couple comments on that um I think I think all of us would like a clear understanding of where we are on our budget and um obviously next council we'll get our Q2 possibly. Okay. So maybe you can give us a rough idea because I I sort of want to know exactly where we are. So our 10year but talking mostly just about the next two years

but but in that format we have a starting cash amount we have our revenues and we have expenditures according to Q1. um or what could come into Q2 are adjustments to all of those things. So, changing starting cash, changing revenue assumptions based on the direction we just gave them, and then figuring out are we able to like offset some of our expenditures or overtimes or whatever and where are we going to land on expenses. That gives us sort of where we are at the end to know if we have a deficit, which would then we should decide, do we want to use the 3.2 2 million to cover our deficit so that we can go into the next year. That's that would be our starting amount and then to know what's the deficit at the end of that year with the different budget assumptions we just made revenue assumptions and in light of the different expenditures because we have the U one that's going to go up too. So given all of those things I'd like to know how much that 3.2 is going to make a difference as far as because

I say this I've said this like it sounds awesome we have a $3.2 $.2 million bonus that we got, but if we're overdrawn by 3.5, we really we don't. So, it's like so I would I would love I would also love to know like where are we at financially to know if that 3.2 is covering expenses or if it gives us some type of I don't think it's going to give us a surplus, but we should know if we're going to be deficit spending, which we will be doing at the rest on the next but on the next agenda items is how much of a deficit spend are we going to do? And if still water and then a separate issue of still water um I think we probably it would probably be beneficial to all of us to get some type of a presentation so that we clearly understand and it's written down you have this costs that are coming when this escrow closes you are now responsible to build this road. If you get the money in March that's great but if you don't you have to use whatever you have available to get there. So I would think that the still water to your point we should discuss sort of like best case scenario worst case scenario for sure is coming in the one year or two years or three years when it comes to that area because we've sort of taken from that account over and over in the in in council for over many years and now it's kind of we've reached the point where we actually have to put that money back into that area because of the escros that are closing.

Oh absolutely. I just but I agree with you fully just to add to that that I would like to see in that those options. One of the options may be floating a bond. That's all I How does it work with onetime money for a bond?

Yeah. So, um I think city attorney touched on this briefly. I I would not recommend one-time money being the way that you plan to pay for a bond. My recommendation would be it's it's part of a larger conversation. Um, and I I did want a little bit of clarification because um, you know, I know in individual conversations I've mentioned to some council members, um, one potential strategy out of Still Water would be issuing a bond to to finish our needs out there. And and frankly, if we don't get the grant, it probably is the only strategy because we're not going to come up with that level of cash immediately.

Um, so I I do want a little clarification on that. But it's important for council to realize, let's just say we're going to issue a $10 million bond tomorrow, that our our current 10-year plan based on the the revenue assumptions, just frankly, is going to require expenditure cuts. If council so chose to issue a bond, and let's say that the payments on a $10 million bond were I'm just using round numbers. This is not good scientific numbers, so don't quote me on this, but let's just say it was $400,000 a year to make the payment on that bond for 30 years. Well, now let's just for the sake of round numbers say that um we have a $2.5 million shortfall after we adjust these revenues uh per year. If you wanted to issue a bond that was going to cost you $500,000 a year, well now now you're talking about a $3 million need to make other expenditure decisions. So certainly it is a strategy we can use and and frankly I don't think it's isolated to just discussing Still Water or our roads. Um, I think there's a lot of things that need to have a strategic discussion about um where and when we plan to fund and how uh council wishes to fund those type of operations. Some things that come to my mind is I know um uh the sports park, you know, new turf out there is needed. Uh if we're going to continue to operate it, um at some point we're going to have to make a decision about what turf we're willing to replace. How are we going to come up with that money? And a bond is another option in that regard. And so I frankly think this is probably rolled into whether we call it future workshops or future presentations based on the information I heard multiple council members just say they want to see brought back to them based on the direction that we received tonight. I think it's obvious the next conversation is around expenditures and and what's going to happen with expenditures. And frankly, part of that conversation is expenditures that are not currently included in our 10-year plan, but we should be planning if council prioritizes those as as expenditure needs to pay for in the future. And

sorry, one last thing, onetime money versus ongoing money. Um, I think it's important for council to to understand the difference between a onetime source of money because, um, I was actually going to make the comment as council member Resner talked about building uh, future reserve policy, right? Um, it's easy to carve off one-time money here and there if you have revenue results that are better or worse. Um, but it's it's very different when you're looking at a structural budget issue where you don't have enough revenues to fund the expenditures that are built into the budget.

At that point, you're talking about ongoing types of budgetary concerns, which are very different than one-time budget concerns. And so, a revenue, whether it be the rancheria or property sales, is one time. It's $7 million that might be able to buy you time towards a future decision or it might be able to do some type of one-time expense, but it is not something that I would recommend council building uh long-term budget projections based on a one-time source of money because it inherently is going to go away and we're going to run out of it. And if the revenue assumptions don't somehow magically beat the assumptions we all just discussed here at this meeting, then you are right back where we are right now looking to make future expenditure cuts. So, sorry long-winded way of hopefully I answered all the questions.

So, can we just ask given what you know right now, could you give us an idea of the deficit we're looking at for this year and next year? So, yes. Um, but it's there was some nuance to the conversation tonight that I certainly don't have captured on my sheet.

Um, so this was roughly estimated using like the middle of the road scenario on those major revenues. So, I think in some areas we went a little more conservative. I I don't know if it's enough for us to get overly concerned about right in this moment, but um to meet our 10% reserve at the end of this current fiscal year, um I know council member Adette mentioned uh you have kind of your beginning reserve. Uh that will uh when we return to council, that will be adjusted down from where it was forecasted when we um built the 10-year plan. So you have a one-time issue there. That's a one-time reduction to the reserve. Um but to meet our 10% reserve would require roughly $3 million of just for the first year. So if we do nothing, right, this assumes no expenditure cuts um and we make all these revenue changes, we're going to fall about $3 million short of our 10% reserve at the end of fiscal year 2026.

So we'll be at 7 million. We'll be at roughly 7 million if we do nothing. Did that take in consideration the $3 million from the rancheria or no? That's money that still does not take into consideration the $3 million from the ranch area. If we count on that money, we would be basically right at our 10% reserve at the conclusion of this only this fiscal year. Um, sorry, you you all just made me think of something that I I lost. What's the what's the change to beginning balance? About $2 million from about nine to about seven is my And then we don't know exactly what the the tax assumption changes that we just made.

Yeah. Originally I estimated that they would be about 1.8 million per year and then getting bigger in some of the out years. I think I think it would it was just made a little worse than that. Um so but roughly roughly so this could be between 3 to four million roughly the first first year. The first year yeah three to four million and then the second year would be about $2.3 million need to cut expenses. I also want to add I know what it was that council made me think of.

We are using some interim cost control measures. I do not have quantification right now on what that's saving us. Um certainly by the next time we discuss this topic with council in a robust way, the new city manager will be here. Um I think we would be prepared to try to quantify what we think that'll save us by the end of the fiscal year. But it's also important for council to know that there there are other cost factors that come in. I'll use the retirement of a city manager or an assistant city manager. That can be hard to estimate how that could impact us. Um so I think the next time we discuss it with council, it would be wise to try to discuss all of those holistically from an expenditure side discussion just for fiscal year 2026. Um further there is going to need to be a need for council to consider long-term modifications or restructuring of the budget based on this revenue conversation that we just had. Um and so that's where I was about to discuss this includes the impacts of the unfunded liability um that you mentioned. But uh the second year probably roughly 2.3 to 2.5 million. The third year would need about 3.5. Um this so this is each individual year and then it's about 4 million in the next three years. Obviously we're talking in the sixyear time horizon but that would be the rough need for cuts to get to the 10% reserve in every year. So wait, the second year you said so the first year it's 3 to four million which could cover the 3.2 could cover that and then for the second year if you start at about 10 million then you assume that you're going to get to

we would need another 2.3 of cuts and that includes the new expenditures to U the higher expenditure cost and the reduced revenues reduced revenues higher costs higher cost. Okay. Okay. Council, go ahead. Sorry. Sorry. Um I think it's important for council to realize that assumes no modifications to expenditures. That's going to be an important ingredient. Yeah. That that's the next ingredient into this conversation and and you know frankly we have a new city manager starting

um welcome some fresh ideas and perspective and we'll return to council with more conversation around uh the expenditure side. So, but that that number you're we're going to know that when next week, next two weeks when you give us or are you going to do Q2 February 17th?

So, my plan um not having the city manager here, Q2 usually includes a budget modification report. Um so, I usually like to do those together. We we could separate them and just bring the Q2 results. Um but typically that's not how we do it. We usually bring the Q2 results with the budget resolution that we call a mid-year budget resolution and we do it all together. Um I wasn't planning on bringing that in two weeks um because I want to roll that entire conversation together as we typically do um just for the purposes of continuity. Excuse me.

So in 2022 we did this you just did we just didn't get the 10ear I wasn't here but we didn't get the tenure till March. So you did February Q2C gave results but then the modifications and the changes to the 10 year and all that kind of stuff happened in March. Is that realistic so that we at least know how we're trending we get these numbers that you had talked about knowing that you're going to move into

Well, at this point I would I would want to give you guys a Q2 report based on the discussion here this evening. And so I think uh at an optimistic scenario would be to bring that back the first meeting in March um to to give you a hey here's how things are trending on not just the revenue side but relative to the modifications to revenues and what's going on on the expenditure side with no modifications. How are we trending through December? Okay. Okay. And and at that point, I probably would be able to give council and I likely would give council some insight into through January because January is a particularly important data point with the pro the first tranch of property tax. Uh we're going to move it along because we got to get to close session soon. But councelor Denuka,

I just want to tell you that this is a great exercise, but I do want the public to realize that we do have a structural problem. We just had an audit committee meeting for the last year's budget and uh audit went fine by an external audit com company. However, the reality is the cost of providing the basic services like police, fire, roads etc. is exceeding our total revenue and uh if you see the trend of cost the net cost of providing service and correct me if I'm wrong s Robinson but it has pretty much doubled over last four five years or so the net cost and there is no way around for us to um fight those things unless we bring our revenue up somehow or other and that's something which we need to really think about how to grow our economy how to grow jobs and increase the wealth.

Okay, good. Uh, last comment for the council. I know we were going to uh we have a special meeting date held for February 17th. We accomplished quite a bit today. Um, we may we may be able to not have that meeting save the day for William on his first day of the job to have more time prepare for the council meeting, but do you see a purpose to hold that meeting date or we can um No, I don't. Okay. So, I don't think so. I thought we've been productive. Okay. So we can remove that council odette. You're good. Okay. Yeah. Um so we'll remove that special meeting date. If something comes up we need to add it back. We can do that. So but we're going to go to close session now. So thank you for everybody for attending and your patience and uh we'll see you back here

close to six as we can. So we're going to try. And Mr. Mayor, if there's no public comment, I would just announce now that the the uh council is going to consider items 4 A through 4E in close session. Those items are described in more detail on the written agenda available at the back of the room. Okay, good.